Promotions
For retailers, the key is to treat "fans" differently than other customers by providing special access to offers and information. Using Facebook as a one-way communications channel is a baby step, but broadcasting deals already found in other channels isn't a particularly effective engagement model. A smarter approach is to reward fans by, for instance, providing Facebook-only discounts and sneak peeks at upcoming products.
Participatory promotions are particularly effective as they add excitement to online purchasing and an incentive for customers to invite other friends. For example, Lowes ran a Black Friday campaign on Facebook in which it offered a limited number of items at ridiculously low prices for fans only. Most discounts were in the range of 90% and were limited to the first 100 people to check out with the item at lowes.com. Not only did this engage existing customers, but it drove new customers to "like" Lowes' Facebook page, allowing Lowes to post future deals on their newsfeeds.
Crowdsourcing
Wal-Mart and Gap have used crowdsourcing tactics on Facebook, inviting large groups to participate in shaping an offer or strategy. The Wal-Mart Crowd Savers program, for example, offers a potential deal to Facebook fans that is only activated if enough fans "like" the promotion — in effect, joining together to reach a goal — much like Groupon's model. Similarly, last year Gap asked its Facebook fans to comment on its new logo design. After a barrage of negative feedback from fans, Gap invited them to submit their own designs. Responding to customers' outcry, the retailer ultimately restored its original logo.
Check-ins
Mobile-device check-ins are a popular way to electronically announce your arrival at a location. This has enormous potential value for retailers who, if they identify customers at all, typically don't do it until checkout, at which point it's too late to influence a purchase. Facebook Deals enables retailers to provide electronic coupons and loyalty points when customers check in at arrival, increasing store traffic and sales, and giving retailers a clearer picture of their customers' behavior. Last year REI drove traffic to its stores by offering $1 donations to charity for every check-in, with a ceiling of $100,000. American Eagle has offered 20% discounts to customers who check into its stores.
Games
Games like Farmville and Mafia Wars hosted on Facebook are immensely successful, creating an ideal opportunity for retailers to do something they know well: marry entertainment and merchandising. Last summer 7-Eleven partnered with game-maker Zynga to extend social games into the physical world. Items such as Slurpees and Big Gulps were branded with Farmville, Mafia Wars, and YoVille designs that had redemption codes for in-game rewards. Meanwhile, teen-fashion retailer Wet Seal has been developing its own Facebook game, Chic Boutique. The retailer is hoping customers will compete with each other online to design outfits compiled from items in its catalog, increasing awareness of Wet Seal's offerings and driving sales.
Social Shopping
The most obvious use of Facebook is also the most elusive — to create more than just an e-commerce store within a Facebook frame. Over the past two years several retailers have made it possible for customers to browse a subset of products on the company's Facebook page, but they usually rely on their e-commerce site to complete the transaction. This is a step in the right direction, but to take real advantage of Facebook, retailers must make it easier for people on the site to communicate with each other about products, promotions, and reviews, and seamlessly make purchases.
To that end JCPenney recently opened a storefront on Facebook containing its entire catalog of products. The UK retailer ASOS quickly followed suit. Facebook is testing a Buy-with-Friends program, currently limited to virtual goods, that publishes users' purchases on friends' newsfeeds and, by offering discounts, encourages those friends to make the same purchase.
All companies, not just retailers, should be using social media like Facebook to listen to what customer are saying about their products and brand; attract them by using promotions, contests, and games; and involve them to keep them loyal and take advantage of the power of influentials. These are the early days, and while it's uncertain what will work best, it's likely that retailers that don't experiment with social commerce will find their customers defecting to those that do.
David Dorf is the Senior Director of Technology Strategy at Oracle Retail.
This article appears in The Harvard Business Review Blog: "The Conversation"
